Top 3 hurdles facing housing associations

We are all aware there is a shortage of genuinely affordable homes in the UK.

The government seems to be saying all the right things when it comes to tackling the housing crisis with buzz words like ‘Help to Buy’, ‘Right to Buy’ and ‘Pay to Stay’ but what are they actually doing to help the biggest providers of affordable homes?

With the Autumn statement just around the corner we thought we would take a look at the issues housing associations face in building new affordable homes and what needs to be done to address them.

Top 3 hurdles facing housing associations

1. 1% rent reduction

What is it?

According to the Welfare Reform and Work Act 2016 set out by the government, social housing providers are required to decrease rents by 1% each year until 2020.

How will this affect housing associations?

Housing association development programmes rely heavily on borrowing against project rental income over the long term. So if rents go down so does the viability of their business plan and consequently their ability to borrow money to build new affordable homes.

2. Right to Buy

What is it?

Housing association tenants living in their home for 3 years or more can apply to buy their home at a discounted rate. Under the scheme housing associations are also required to replace any homes sold on a one-for-one basis.

How will this affect housing associations?

The more tenants that take up the Right to Buy the less rental income housing associations will receive which added together with the decrease in rent to begin with is a real issue when trying to raise funds to build new affordable homes.

3. Starter Homes initiative

What is it?

The starter homes initiative was set up to provide first time buyers with a 20% discount on the full market price of a new home.

How will this affect housing associations?

One of the ways in which housing associations look to provide more affordable homes is by buying them off builders/developers that have allocated a portion of their site under section 106 requirements. However there is much uncertainty as to whether starter homes will count towards the percentage of affordable homes required on a new build development. If this was the case housing associations would need to rely on developing new affordable homes themselves which goes back to the increasing pressures on financing such projects.

It is clear that something needs to be done to help tackle these issues and the National Housing Federation have submitted their own ideas to parliament of what this looks like.

So for now we will just have to watch this space and see what comes out of the Autumn statement at the end of November.